Most consumers would likely agree that consumers should get what they pay for. If a product or service fails to deliver its promises, refunds are in order.
That kind of thinking guided the Obama Administration decision to address false promises to address false promises made to student loan borrowers.
A rule known as the “borrower defense to repayment,” came on the heels of successive for-profit college closures that left thousands of students stranded educationally and financially. The federal rule provided a way for snookered students and borrowers to apply for and secure loan forgiveness. Its premise was that both borrowers and taxpayers were assured that the Department of Education was looking out for them.
However with a new administration and Education Secretary, rules that made sense and brought taxpayers financial fairness have been repealed and replaced with other rules that favor for-profit colleges, loan servicers, and other business interests.
Just as many people were about to begin their Labor Day holiday, the federal Department of Education announced it was changing a key rule that provided a pathway to federal loan forgiveness. Instead, a new rule puts in place a process that will be cumbersome, lengthy and nearly impossible for consumers to successfully secure relief.
Commenting on the rule that will now apply to all federal student loans made on or after July 1, 2020, Secretary Betsy DeVos said, “We believe this final rule corrects the wrongs of the 2016 rule through common sense and carefully crafted reforms that hold colleges and universities accountable and treat students and taxpayers fairly.”
Excuse me Secretary DeVos, the rule was promulgated due to the thousands of wrongs resulting from less than truthful recruitment practices, false advertising and targeting of vulnerable populations: low-income, first-generation college students who were often people of color, and veterans seeking new skills in a return to civilian life. For-profit colleges largely remain financially solvent by their heavy dependence upon taxpayer-funded student loans.
For black America, the effects of predatory student lending at for-profit colleges comes with severe consequences. According to research by the Center for Responsible Lending (CRL):
•Only 21 percent of all for-profit students in four-year programs graduate within six years;
•Four years after graduation, black students with a bachelor’s degree owe almost double the debt their white classmates owe;
•While for-profit college enrollment represents 8.6 percent of all college students, these schools generate over 34 percent of all students who default on their loans.
While this new rule may make sense to Secretary DeVos, education advocates had an opposite reaction, quickly and emphatically detailing how the rule change is as negative as it is costly.
“After the collapse of Corinthian College and ITT Tech, two of the largest for-profit education companies in the country, the Obama Administration created the Borrower Defense rule to protect students and taxpayers from deceptive practices that could jeopardize the future of thousands of students and our economy,” said Ashley Harrington, a CRL Senior Policy Counsel, and a primary negotiator during the Education Department’s negotiated rule-making process.